##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 Commission File #0-6072
 EMS TECHNOLOGIES, INC.
  Georgia
    
    58-1035424(State or other jurisdiction of
    
    (IRS Employer ID Number)incorporation or organization)
 660 Engineering Drive, Norcross, Georgia
    
    30092(Address of principal executive offices)
    
    (Zip Code)
 
 o þ
 o þ
 þ o
 o þ
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
  AVAILABLE INFORMATION
 www.ems-t.com




---



TABLE OF CONTENTS  Part IITEM 1. BusinessITEM 1A. Risk FactorsITEM 1B. Unresolved Staff CommentsITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. Submission of Matters to a Vote of Security HoldersPART IIITEM 5. Market for Registrants Common Equity and Related Shareholder Matters and Issuer Purchases of Equity SecuritiesITEM 6. Selected Financial DataITEM 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 7A. Quantitative and Qualitative Disclosures about Market RiskITEM 8. Financial Statements and Supplementary DataITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureITEM 9A. Controls and ProceduresITEM 9B. Other InformationPART IIIITEM 10. Directors, Executive Officers, and Corporate GovernanceITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersITEM 13. Certain Relationships and Related Transactions and Director IndependenceITEM 14. Principal Accountant Fees and ServicesPART IVITEM 15. Exhibits, Financial Statement SchedulesSIGNATURESEX-4.2 AGREEMENT WITH RESPECT TO LONG-TERM DEBTEX-4.9 AMENDMENT NO.3 TO U.S. REVOLVING CREDIT AGREEMENTEX-10.6 FORM OF AGREEMENT RELATED TO CHANGE-OF-CONTROL EVENTSEX-10.25 SUMMARY OF COMPENSATION ARRANGEMENTS WITH NON-EMPLOYEE MEMBERS OF THE BOARD OF DIRECTORSEX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32 SECTION 906 CERTIFICATIONS OF CEO AND CFO    Table of Contents  FORWARD-LOOKING STATEMENTS
  1.
    
    statements about what the Company or management believes or expects,2.
    
    statements about anticipated technological developments or anticipated market
response to or impact of current or future technological developments or product
offerings,3.
    
    statements about trends in markets that are served or pursued by the Company,4.
    
    statements implying that the Companys technology or products are well-suited for
particular emerging markets, and5.
    
    statements about the Companys plans for product developments or market initiatives.
  
 Part I.
 
 ITEM 1. Business
 Overview
     2 of 76




---



##### Table of Contents



Competitive Strengths
 Technological Leadership
  Commitment to Research and Development
  Technological Synergies
  3 of 76




---



##### Table of Contents



Strong Customer Relationships
  Diverse Global Customer Base
  Strong Manufacturing Capabilities
  Our Markets and Products
   Business Unit
    
    Primary Operations
    
    Percentage of Net Sales2006
    
    2005
    
    2004Defense & Space Systems
    
    Highly engineered hardware for satellites and defense electronics applications (primarily defense)
    
    
    20.1
    %
    
    
    22.8
    %
    
    
    24.8
    %LXE
    
    Rugged mobile terminals and related equipment for wireless data collection (predominantly commercial)
    
    
    52.8
    
    
    
    54.5
    
    
    
    55.5SATCOM
    
    Satellite communications antennas and terminals for aircraft and ground-based vehicles and satellite ground stations for search and rescue operations (majority commercial)
    
    
    27.1
    
    
    
    22.7
    
    
    
    19.7
 4 of 76




---



##### Table of Contents



Defense & Space Systems
   Products
    
    Key Features/Benefits
    
    Selected Applications
    
    ProgramsSpace Solutions
    
    Microwave subsystems
capable of
high-frequency, low
noise, high-power
and fast switching,
facilitating
jam-resistant,
secure mobile
communications and
surveillance
    
    Direct broadcast television
(incl. HDTV)
Direct broadcast radio
Earth Observation/ Environmental
sensing
High-rate communications
    
    Wideband Gapfiller
Satellite
Transformational
Satellite (TSAT)
XMRadio, SIRIUS
NPOESS, Skynet, COSMO

AEHF, Intelsat,
Skynet5, Inmarsat,
TSAT, WGS, Globalstar, otherAirborne and
Terrestrial
Solutions
    
    Antenna and
microwave subsystems
supporting satellite
communications,
radar, signal
intelligence,
electronic warfare
and line-of-sight
communications
    
    Airborne (Commercial)Airborne (Military)NavalTerrestrial
Smart Weapons
    
    JetBlue, Frontier,
WestJet, Virgin Blue
Airlines
F-22, ALQ-211, B2,
CV-22, JSTARS, other
Phalanx, High Altitude
Long Endurance (HALE)
datalink
WIN-T, other
JCM, Small Diameter
Bomb II, Medium Range
Munition (MRM)Standard Products &
Engineering
Services
    
    Ferrite components
controlling
microwave signals
Positioners to
precisely point
optical sensors and
microwave antennas
Services for the
maintenance,
operation, and
upgrade of precision
tracking systems
    
    Electronic Warfare
Direct broadcast television/radio
Earth observation satellites
Precision tracking
    
    F-14, F-16
DirecTV, XMRadio,
SIRIUS
CloudSat, SARLupe, other
Trident II, NASA
Shuttle Return to
Flight, Sea Launch, LLC
 5 of 76




---



##### Table of Contents



LXE
    Ò Ò
   6 of 76




---



##### Table of Contents



Products
    
    Key Features/Benefits
    
    Selected Applications
    
    CustomersHand-Held TerminalsVehicle-Mounted Terminals
Wireless Networks
    
    Small, lightweight
and rugged,
providing true
mobility
Heavier-duty design
for use on
forklifts, cranes,
and other material
handling vehicles

Communications link
between mobile
computers and local
network, primarily
based on 802.11
standard
    
    Warehousing, Logistics
    
    Consumer product
manufacturers,
Third-party
logistics
providers,
Retailers,
Container Port
OperatorsHost connectivity
software; accessory
products; maintenance
services
    
    Industry-standard
connectivity to
various host
computers; enhanced
system
functionality;
extended service on
either a contract or
pay-as-you-go basis
 SATCOM
     7 of 76




---



##### Table of Contents



Products
    
    Key Features/Benefits
    
    Selected Applications
    
    CustomersAeronautical Antennas
    
    Mechanically and
electronically-steered antennas for
two-way
communications
connected to an
aircrafts
navigational system,
steerable antenna
systems for live
television from
broadcast satellites
    
    High-end corporate
jets, private jets,
military
helicopters,
military transport
and surveillance,
commercial airlines
    
    Gulfstream,
Bombardier,
Honeywell, Dassault, ThalesAeronautical Terminals
    
    Provide aircraft
operators with
two-way high-speed
data (broadband)
capability
    
    Corporate aircraft,
government and
military aircraft,
commercial airlines
    
    Corporate aircraft
modification centers, U.S.
Department of Defense,
Northrup-Grumman, L3,
Boeing, Rockwell-Collins,
Honeywell, ThalesInmarsat High-Speed
Data Terminals
    
    Worldwide access to
corporate networks
and the Internet
using the Inmarsat
satellite system
    
    Military transport,
Peacekeeping, Media
    
    U.S. Army, Canadian
Department of National
Defense, CNNSatellite Packet Data
Terminals
    
    Two-way messaging
and location
information in North
America, Mexico
Central America,
Afghanistan
    
    Transportation,
Public Safety,
Workforce
Automation, Oil and
Gas Remote
Monitoring and
Control, Force
Tracking
    
    Long-Haul Trucking
Companies, @Road, NATOEmergency Management
Products
    
    Hardware and
software features
for Search and
Rescue (SAR) systems
    
    Rescue and Mission
Control Centers
    
    Over 18 Governments
Worldwide
  Sales and Marketing
      8 of 76




---



##### Table of Contents



Research, Development and Intellectual Property
    Backlog
  Manufacturing
  
    
    to perform those functions for which we have special capabilities and that are most
critical to quality and timely performance,
    
    to equip ourselves with the modern tools we need to perform our manufacturing functions
efficiently,
    
    to use outside sources for functions requiring special skills that we do not have, or
that do not offer attractive returns on internal investment in people and equipment, and
    
    to continually seek ways to further improve the cost-effectiveness and time-to-market of
our manufacturing operations.
  9 of 76




---



##### Table of Contents



Materials
     Competition
     10 of 76




---



##### Table of Contents



Employees
  Government Regulation
     11 of 76




---



##### Table of Contents



EXECUTIVE OFFICERS OF THE REGISTRANT
  Paul B. Domorski
 Don T. Scartz
 Timothy C. Reis, ,
 Gary B. Shell, ,
 Perry D. Tanner, ,
 Martin M. Broadwell
 James S. Childress
 Neilson
A. Mackay
 ***********************
 12 of 76




---



##### Table of Contents



ITEM 1A. Risk Factors
 We believe the risks and uncertainties described below are the most significant risks we face. If
any of the following risks actually materialize, our business could be harmed. Additional risks and
uncertainties not presently known to us, or that we currently consider immaterial, may also impair
our operations or results. In all of those cases, the trading price of our common stock could
decline, and investors could lose all or part of their investments.
 Risks Related to Our Business
  Decisions by our customers about the timing and scope of major programs can have a significant
effect on our net sales and earnings
  If our commercial customers fail to find adequate funding for major potential programs, or our
government customers do not receive necessary funding approvals, our net sales would decline.
  We may encounter technical problems or contractual uncertainties, which can cause delays, added
costs, lost sales, and liability to customers.
    13 of 76




---



##### Table of Contents



If we cannot continue to rapidly develop, manufacture and market innovative products and services
that meet customer requirements for performance and reliability, we may incur development costs
that we cannot recover and our net sales and earnings will suffer.
  Competing technology could be superior to ours, and could cause customer orders and net sales to
decline.
  Our competitors marketing and pricing strategies could make their products more attractive than
ours. This could cause reductions in customer orders or company profits.
  Our transitions to new product offerings can be costly and disruptive, and could adversely affect
our net sales or profitability.
  Our products may inadvertently infringe third party patents, which could create substantial
liability to our customers or the third-party patent owners.
  We may not be successful in protecting our intellectual property.
  14 of 76




---



##### Table of Contents



Our success depends on our ability to attract and retain a highly skilled workforce.
  We depend on highly skilled suppliers, who may become unavailable or fail to achieve desired levels
of technical performance.
  Changes in regulations that limit the availability of radio frequency licenses or otherwise result
in increased expenses could cause our net sales or earnings to decline.
  The export license process for space products has become uncertain, increasing the chance that we
may not obtain required export licenses in a timely or cost-effective manner.
  15 of 76




---



##### Table of Contents



Export controls on space technology restrict our ability to hold technical discussions with foreign
customers, suppliers and internal engineering resources, which reduces our ability to obtain sales
from foreign customers or to perform contracts with the desired level of efficiency or
profitability.
  Economic or political conditions in other countries could cause our net sales or earnings to
decline.
  Unfavorable currency exchange rate movements could result in foreign exchange losses and cause our
earnings to decline.
  Our net sales in certain markets depend on the availability and performance of other companies with
which we have marketing relationships.
  Customer orders in backlog may not result in sales.
  16 of 76




---



##### Table of Contents



Our products typically carry warranties, and the costs to us to repair or replace defective
products could exceed the amounts we have experienced historically.
  Changes in our consolidated effective income tax rate and the related effect on our results can be
difficult to predict.
  Our business and revenue growth could be limited by our inability to obtain additional financing.
  We may not effectively manage possible future growth, which could result in reduced earnings.
  We may make acquisitions and investments that could adversely affect our business.
  17 of 76




---



##### Table of Contents



Risks Related to our Common Stock
  Our quarterly results are volatile and difficult to predict. If our quarterly performance results
fall short of market expectations, the market value of our shares is likely to decline.
  Our share price may fluctuate significantly, and an investor may not be able to sell our shares at
a price that would yield a favorable return on investment.
  
    
    actual or anticipated operating results,
    
    the limited average trading volume and public float for our stock, which means that
orders from a relatively few investors can significantly impact the price of our
stock, independently of our operating results,
    
    announcements of technological innovations, new products or new contracts by us,
our customers, our competitors or our customers competitors,
    
    government regulatory action,
    
    developments with respect to wireless and satellite communications, and
    
    general market conditions.
  Future sales of our common stock may cause our stock price to decline.
  18 of 76




---



##### Table of Contents



Provisions in our governing documents and law could prevent or delay a change of control not
supported by our Board of Directors.
  
    
    allow our shareholders the right to acquire common stock from us at
discounted prices in the event a person acquires 20% or more of our common
stock, or announces an attempt to do so, without our Board of Directors
prior consent;
    
    authorize the issuance of up to 10,000,000 shares of blank check
preferred stock by our Board of Directors without shareholder approval,
which stock could have terms that could discourage or thwart a takeover
attempt;
    
    limit who may call a special meeting of shareholders;
    
    require unanimous written consent for shareholder action without a meeting;
    
    establish advance notice requirements for nominations for election to the
Board of Directors or for proposing matters that can be acted upon at
shareholder meetings;
    
    adopt the fair price requirements and rules regarding business
combinations with interested shareholders set forth in Article 11, Parts 2
and 3 of the Georgia Business Corporation Code; and
    
    require approval by the holders of at least 75% of the outstanding common
stock to amend any of the foregoing provisions.
 19 of 76




---



##### Table of Contents



ITEM 1B. Unresolved Staff Comments
  
 ITEM 2. Properties
    
 ITEM 3. Legal Proceedings
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  20 of 76




---



##### Table of Contents



PART II
 
 ITEM 5. Market for Registrants Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities
  2006 Price Range
    
    2005 Price RangeHigh
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    18.65
    
    
    
    16.14
    
    
    $
    17.13
    
    
    
    12.48Second Quarter
    
    
    20.51
    
    
    
    17.78
    
    
    
    16.68
    
    
    
    10.75Third Quarter
    
    
    19.31
    
    
    
    14.53
    
    
    
    18.90
    
    
    
    14.52Fourth Quarter
    
    
    21.17
    
    
    
    17.58
    
    
    
    18.50
    
    
    
    15.09
  21 of 76




---



##### Table of Contents



ITEM 6. Selected Financial Data
 Years ended December 31,(in thousands, except earnings (loss) per share)
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Net sales
    
    $
    261,119
    
    
    
    225,887
    
    
    
    201,100
    
    
    
    192,473
    
    
    
    173,748Cost of sales
    
    
    164,611
    
    
    
    146,965
    
    
    
    130,623
    
    
    
    124,885
    
    
    
    113,076Selling, general and administrative expenses
    
    
    66,335
    
    
    
    56,944
    
    
    
    49,346
    
    
    
    45,644
    
    
    
    39,663Research and development expenses
    
    
    15,816
    
    
    
    11,754
    
    
    
    12,034
    
    
    
    11,192
    
    
    
    11,247Contract reserve adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,500
    )Operating income
    
    
    14,357
    
    
    
    10,224
    
    
    
    9,097
    
    
    
    10,752
    
    
    
    13,262Interest income and other
    
    
    2,254
    
    
    
    588
    
    
    
    1,085
    
    
    
    16
    
    
    
    (330
    )Foreign exchange (loss) gain
    
    
    (710
    )
    
    
    (288
    )
    
    
    (187
    )
    
    
    (260
    )
    
    
    309Interest expense
    
    
    (1,921
    )
    
    
    (3,304
    )
    
    
    (1,791
    )
    
    
    (1,534
    )
    
    
    (1,984
    )Earnings from continuing operations before
income taxes
    
    
    13,980
    
    
    
    7,220
    
    
    
    8,204
    
    
    
    8,974
    
    
    
    11,257Income tax benefit (expense)
    
    
    1,823
    
    
    
    (2,094
    )
    
    
    (2,134
    )
    
    
    (1,974
    )
    
    
    (3,039
    )Earnings from continuing operations
    
    
    15,803
    
    
    
    5,126
    
    
    
    6,070
    
    
    
    7,000
    
    
    
    8,218Discontinued operations:Earnings (loss) from discontinued operations
before income taxes
    
    
    24,427
    
    
    
    (13,971
    )
    
    
    (6,016
    )
    
    
    (46,481
    )
    
    
    1,503Income tax benefit (expense)
    
    
    (7,222
    )
    
    
    (2,598
    )
    
    
    138
    
    
    
    2,089
    
    
    
    (1,134
    )Earnings (loss) from discontinued operations
    
    
    17,205
    
    
    
    (16,569
    )
    
    
    (5,878
    )
    
    
    (44,392
    )
    
    
    369Net earnings (loss)
    
    $
    33,008
    
    
    
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )
    
    
    8,587Net earnings (loss) per share:Basic:From continuing operations
    
    $
    1.08
    
    
    
    0.46
    
    
    
    0.55
    
    
    
    0.65
    
    
    
    0.78From discontinued operations
    
    
    1.18
    
    
    
    (1.48
    )
    
    
    (0.53
    )
    
    
    (4.15
    )
    
    
    0.03Net earnings (loss)
    
    $
    2.26
    
    
    
    (1.02
    )
    
    
    0.02
    
    
    
    (3.50
    )
    
    
    0.81Diluted:From continuing operations
    
    $
    1.08
    
    
    
    0.46
    
    
    
    0.54
    
    
    
    0.65
    
    
    
    0.77From discontinued operations
    
    
    1.17
    
    
    
    (1.48
    )
    
    
    (0.52
    )
    
    
    (4.12
    )
    
    
    0.03Net earnings (loss)
    
    $
    2.25
    
    
    
    (1.02
    )
    
    
    0.02
    
    
    
    (3.47
    )
    
    
    0.80Weighted average number of shares:Common
    
    
    14,621
    
    
    
    11,179
    
    
    
    11,094
    
    
    
    10,702
    
    
    
    10,561Common and dilutive common equivalent
    
    
    14,679
    
    
    
    11,225
    
    
    
    11,237
    
    
    
    10,785
    
    
    
    10,731
 As of December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Working capital related to continuing operations
    
    $
    176,570
    
    
    
    67,580
    
    
    
    68,835
    
    
    
    22,608
    
    
    
    35,170Total assets
    
    
    291,684
    
    
    
    225,341
    
    
    
    256,953
    
    
    
    230,968
    
    
    
    258,422Long-term debt, including current installments
    
    
    14,857
    
    
    
    43,408
    
    
    
    61,454
    
    
    
    53,569
    
    
    
    52,444Shareholders equity
    
    
    213,083
    
    
    
    113,656
    
    
    
    126,021
    
    
    
    120,042
    
    
    
    145,985
  22 of 76




---



##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    Defense & Space Systems- Highly engineered hardware for satellites and defense
electronics applications;
    
    LXE- Rugged mobile computer terminals and related equipment for wireless local area
networks; and
    
    SATCOM- Satellite communications antennas and terminals for aircraft and ground-based
vehicles, and satellite ground stations for search and rescue operations.
    Overview:
 
    
    In February 2006, the Company completed the sale of 3,795,000 shares of its common stock
in a registered public offering. The offering price was $16.70 per share, and the Company
received net proceeds of approximately $58.7 million after deducting underwriting
discounts, commissions and other offering expenses. The Company used a portion of these
net proceeds to repay all of its borrowings under its U.S. and Canadian revolving credit
facilities.
    
    On March 9, 2006, the Company completed the sale of its SatNet division, reported in
discontinued operations.
    
    On December 1, 2006, the Company completed the sale of its EMS Wireless division,
reported in discontinued operations.
 For continuing operations:
 
    
    Net sales increased by 15.6% to $261.1 million in 2006. This was mainly due to record
net sales at our SATCOM and LXE divisions.
    
    Strong operating income was recorded by each of the three divisions in 2006, and
increased by 40.4% over that reported in 2005.
    
    A $3.3 million tax credit was recognized in 2006 related to research and development
costs qualifying for U.S. Federal tax credits. The Company also recognized a $1.7 million
benefit from the reduction of the valuation allowance based upon the continuing
profitability of SATCOM.
 23 of 76




---



##### Table of Contents



For discontinued operations:
 
    
    Our discontinued operations reported earnings of $24.4 million before income tax in
2006. This included a $26.9 million pre-tax gain on the sale of our EMS Wireless division,
an operating loss from our SatNet division, and adjustments to settle various contingent
items, as well as legal, audit, and other outside services expenses.
    
    The Company recognized a $3.3 million benefit with respect to the utilization of a
previously reserved capital loss carryforward.
 Description of Net Sales, Costs and Expenses
 Net sales
    Cost of sales
      24 of 76




---



##### Table of Contents



Selling, general and administrative expenses
  Research and development expenses
  Interest income and other
  Foreign exchange gains and losses
   Interest expense
  Income taxes
   25 of 76




---



##### Table of Contents



Discontinued operations
  Results of Operations
 Years Ended December 312006
    
    2005
    
    2004Product net sales
    
    
    85.6
    %
    
    
    85.1
    %
    
    
    85.9
    %Service net sales
    
    
    14.4
    
    
    
    14.9
    
    
    
    14.1Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Product cost of sales, as a percentage of product
net sales
    
    
    62.4
    
    
    
    64.9
    
    
    
    63.6Service cost of sales, as a percentage of service
net sales
    
    
    66.7
    
    
    
    66.2
    
    
    
    73.3Cost of sales
    
    
    63.0
    
    
    
    65.1
    
    
    
    65.0Selling, general and administrative expenses
    
    
    25.4
    
    
    
    25.2
    
    
    
    24.5Research and development expenses
    
    
    6.1
    
    
    
    5.2
    
    
    
    6.0Operating income
    
    
    5.5
    
    
    
    4.5
    
    
    
    4.5Interest income and other
    
    
    0.9
    
    
    
    0.3
    
    
    
    0.5Foreign exchange loss
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Interest expense
    
    
    (0.7
    )
    
    
    (1.5
    )
    
    
    (0.9
    )Earnings from continuing operations before
income taxes
    
    
    5.4
    
    
    
    3.2
    
    
    
    4.0Income tax (expense) benefit
    
    
    0.7
    
    
    
    (0.9
    )
    
    
    (1.0
    )Earnings from continuing operations
    
    
    6.1
    
    
    
    2.3
    
    
    
    3.0Discontinued operations:Earnings (loss) from discontinued operations before
income taxes
    
    
    9.3
    
    
    
    (6.2
    )
    
    
    (3.0
    )Income tax (expense) benefit
    
    
    (2.8
    )
    
    
    (1.2
    )
    
    
    0.1Earnings (loss) from discontinued operations
    
    
    6.5
    
    
    
    (7.4
    )
    
    
    (2.9
    )Net earnings (loss)
    
    
    12.6
    %
    
    
    (5.1)
    %
    
    
    0.1
    %
 Years ended December 31, 2006 and 2005:
   26 of 76




---



##### Table of Contents



Years ended December 31, 2005 and 2004:
   27 of 76




---



##### Table of Contents



28 of 76




---



##### Table of Contents



Net Sales, Cost of Sales, and Operating Income (Loss) by Segment
  Years ended December 312006
    
    
    2005
    
    
    2004Net sales:Defense & Space Systems
    
    $
    52,416
    
    
    
    51,394
    
    
    
    49,815LXE
    
    
    138,001
    
    
    
    123,140
    
    
    
    111,575SATCOM
    
    
    70,702
    
    
    
    51,353
    
    
    
    39,693Other
    
    
    
    
    
    
    
    
    
    
    17Total
    
    $
    261,119
    
    
    
    225,887
    
    
    
    201,100Cost-of-sales percentage:Defense & Space Systems
    
    
    79.1
    %
    
    
    80.0
    %
    
    
    79.0
    %LXE
    
    
    58.5
    
    
    
    60.3
    
    
    
    60.0SATCOM
    
    
    59.4
    
    
    
    60.3
    
    
    
    60.0Total
    
    
    63.0
    
    
    
    65.1
    
    
    
    65.0Operating income (loss):Defense & Space Systems
    
    $
    2,572
    
    
    
    3,186
    
    
    
    2,611LXE
    
    
    11,043
    
    
    
    7,520
    
    
    
    7,262SATCOM
    
    
    6,170
    
    
    
    3,524
    
    
    
    1,713Corporate and other
    
    
    (5,428
    )
    
    
    (4,006
    )
    
    
    (2,489
    )Total
    
    $
    14,357
    
    
    
    10,224
    
    
    
    9,097
 Defense & Space Systems:
  LXE: ®
   SATCOM:
 29 of 76




---



##### Table of Contents



Discontinued Operations:
     Liquidity and Capital Resources
  30 of 76




---



##### Table of Contents



Off-Balance Sheet Arrangements
   31 of 76




---



##### Table of Contents



Commitments and Contractual Obligations
  Payments due by periodLess
    
    
    
    
    
    
    
    
    
    After 5Total
    
    1 year
    
    1-3 years
    
    4-5 years
    
    yearsContinuing Operations:Long-term debt, excluding capital
lease
obligations
    
    $
    14,828
    
    
    
    3,087
    
    
    
    2,433
    
    
    
    2,891
    
    
    
    6,417Interest on outstanding long-term debt
    
    
    4,963
    
    
    
    992
    
    
    
    1,638
    
    
    
    1,233
    
    
    
    1,100Capital lease obligations
    
    
    29
    
    
    
    15
    
    
    
    14
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    34,349
    
    
    
    3,986
    
    
    
    7,741
    
    
    
    6,301
    
    
    
    16,321Deferred compensation agreements
    
    
    550
    
    
    
    47
    
    
    
    311
    
    
    
    109
    
    
    
    83Agreement to acquire satellite service
sub-license
    
    
    8,000
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    4,000Purchase commitments (1)
    
    
    22,511
    
    
    
    22,511
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Purchase commitments primarily represent existing commitments under purchase orders or
contracts to purchase inventory and raw materials for our products. Most of these purchase
orders and contracts can be terminated for a fee that is either fixed or based on when
termination occurs. Critical Accounting Policies
  32 of 76




---



##### Table of Contents



Revenue recognition on long-term contracts
     Inventory valuation
  Evaluation of long-lived assets for impairment
   33 of 76




---



##### Table of Contents



Evaluation of contingencies related to discontinued operations
  Establishment of reserves for deferred income tax assets
   Risk Factors and Forward-Looking Statements
  
    
    economic conditions in the U.S. and abroad and their effect on capital spending
in the Companys principal markets;
    
    difficulty predicting the timing of receipt of major customer orders, and the
effect of customer timing decisions on the Companys quarterly results;
    
    successful completion of technological development programs by the Company and
the effects of technology that may be developed by, and patent rights that may be held or
obtained by, competitors;
    
    U.S. defense budget pressures on near-term spending priorities;
    
    uncertainties inherent in the process of converting contract awards into firm
contractual orders in the future;
 34 of 76




---



##### Table of Contents




    
    volatility of foreign exchange rates relative to the U.S. dollar and their
effect on purchasing power by international customers, and the cost structure of the
Companys non-U.S. operations, as well as the potential for realizing foreign exchange
gains and losses associated with non-U.S. assets or liabilities held by the Company;
    
    successful resolution of technical problems, proposed scope changes, or
proposed funding changes that may be encountered on contracts;
    
    changes in the Companys consolidated effective income tax rate caused by the
extent to which actual taxable earnings in the U.S., Canada and other taxing jurisdictions
may vary from expected taxable earnings;
    
    successful transition of products from development stages to an efficient
manufacturing environment;
    
    changes in the rate at which the Companys products are returned for repair or
replacement under warranty;
    
    customer response to new products and services, and general conditions in the
Companys target markets (such as logistics, and space-based communications);
    
    the success of certain of the Companys customers in marketing our line of
high-speed commercial airline communications products as a complimentary offering with
their own lines of avionics products;
    
    the availability of financing for satellite data communications systems;
    
    development of successful working relationships with local business and
government personnel in connection with distribution and manufacture of products in foreign
countries;
    
    the demand growth for various mobile and high-speed data communications
services;
    
    the Companys ability to attract and retain qualified personnel, particularly
those with key technical skills;
    
    the availability of sufficient additional credit or other financing, on
acceptable terms, to support any large acquisitions that we believe would contribute to our
growth and profitability;
    
    our ability to negotiate successfully with potential acquisition candidates,
finance acquisitions, or effectively integrate the acquired businesses, products or
technologies into the Companys existing businesses and products, and the risk that any
such acquisitions do not perform as expected or are otherwise dilutive to our earnings;
    
    the availability, capabilities and performance of suppliers of basic materials,
electronic components and sophisticated subsystems on which the Company must rely in order
to perform according to contract requirements, or to introduce new products on the desired
schedule; and
    
    uncertainties associated with U.S. export controls and the export license
process, which restrict the Companys ability to hold technical discussions with customers,
suppliers and internal engineering resources and can reduce the Companys ability to obtain
sales from foreign customers or to perform contracts with the desired level of efficiency
or profitability.
  35 of 76




---



##### Table of Contents



Effect of New Accounting Pronouncements
       36 of 76




---



##### Table of Contents



ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
  Revolving credit loan with a bank in the United Kingdom, maturing
in April 2007, interest payable monthly at a variable rate (6.00%
at December 31, 2006)
    
    $
    1,821
   Exchange Rate
    
    $U.S.($U.S. per unit of
    
    in thousandslocal currency)
    
    (reporting currency)Belgium
    
    1.3196 /Euro
    
    $
    4,532Italy
    
    1.3196 /Euro
    
    
    1,591Canada
    
    0.8581 /Dollar
    
    
    1,515Australia
    
    0.7884 /Dollar
    
    
    1,224Sweden
    
    0.1462 /Krona
    
    
    151Netherlands
    
    1.3196 /Euro
    
    
    44France
    
    1.3196 /Euro
    
    
    20Singapore
    
    0.6519 /Dollar
    
    
    20United Kingdom
    
    1.9586 /Pound
    
    
    17Germany
    
    1.3196 /Euro
    
    
    8Total short-term due to parent
    
    
    
    $
    9,122
  Average
    
    
    ($U.S.)Notional
    
    Contract
    
    
    FairAmount
    
    Rate
    
    
    ValueContinuing Operations:Foreign currency forward contractsEuros (sell for U.S. dollars)
    
    
    2,250
    
    
    EURO
    
    
    1.2904
    
    
    $
    (71
    )U.S. dollars (sell for Canadian dollars)
    
    
    17,500
    
    
    USD
    
    
    1.1527
    
    
    
    (159
    )Australian dollars (sell for U.S. dollars)
    
    
    800
    
    
    AUD
    
    
    0.7365
    
    
    
    (39
    )British pounds (buy with Canadian dollars)
    
    
    1,000
    
    
    GBP
    
    
    2.1167
    
    
    
    138$
    (131
    )Embedded derivativesQualifying
U.S. dollar contracts at Canadian subsidiary
    
    
    1,424
    
    
    USD
    
    
    0.8581
    
    
    $
    (20
    )
  37 of 76




---



##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data
  
 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 ITEM 9A. Controls and Procedures
 (a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
   (b) Managements Annual Report on Internal Control Over Financial Reporting
   (c) Changes in Internal Control Over Financial Reporting
  (d) Report of Independent Registered Public Accounting Firm
 
  38 of 76




---



##### Table of Contents



39 of 76




---



##### Table of Contents



ITEM 9B. Other Information.
  
 PART III
 
 ITEM 10. Directors, Executive Officers, and Corporate Governance
  www.ems-t.com
  
 ITEM 11. Executive Compensation
  40 of 76




---



##### Table of Contents



ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
  (c)(a)
    
    
    
    
    
    Number of securitiesNumber of securities
    
    (b)
    
    remaining available forto be issued upon
    
    Weighted average
    
    future issuance underexercise of
    
    exercise price of
    
    equity compensation plansoutstanding options,
    
    outstanding options,
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants and rights
    
    reflected in column(a))Equity compensation plans approved
by security holders
    
    
    752,232
    
    
    $
    18.20
    
    
    
    278,851Equity compensation plans not
approved by security holders
    
    
    282,650
    
    
    $
    18.91
    
    
    
    115,207Total
    
    
    1,034,882
    
    
    $
    18.39
    
    
    
    394,058
  
 ITEM 13. Certain Relationships and Related Transactions and Director Independence
  
 ITEM 14. Principal Accountant Fees and Services
  
 PART IV
 
 ITEM 15. Exhibits, Financial Statement Schedules
      41 of 76




---



##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Years ended December 31, 2006, 2005 and 2004AdditionsBalance at
    
    charged to
    
    
    
    
    
    
    
    
    
    Balancebeginning
    
    costs and
    
    
    
    
    
    
    
    
    
    at endClassification
    
    of year
    
    expenses
    
    Deductions
    
    Other
    
    of yearAllowance for Doubtful Accounts:2004
    
    $
    1,118
    
    
    
    455
    
    
    
    (681)
    (a)
    
    
    
    
    
    
    8922005
    
    
    892
    
    
    
    565
    
    
    
    (869)
    (a)
    
    
    
    
    
    
    5882006
    
    
    588
    
    
    
    500
    
    
    
    (347)
    (a)
    
    
    
    
    
    
    741Valuation Allowance for Deferred Tax Assets:2004
    
    $
    29,748
    
    
    
    7,087
    (b)
    
    
    
    
    
    
    
    
    
    
    36,8352005
    
    
    36,835
    
    
    
    10,134
    (b)
    
    
    
    
    
    
    
    
    
    
    46,9692006
    
    
    46,969
    
    
    
    307
    (b)
    
    
    (14,355)
    (c)
    
    
    
    
    
    
    32,921Valuation Allowance for Assets Held for Sale:2004
    
    $
    13,500
    
    
    
    1,700
    (d)
    
    
    
    
    
    
    
    
    
    
    15,2002005
    
    
    15,200
    
    
    
    16,200
    (d)
    
    
    (25,200)
    (e)
    
    
    
    
    
    
    6,2002006
    
    
    6,200
    
    
    
    
    
    
    
    (6,200)
    (e)
    
    
    
    
    
    
    
 
 (a)
    
    Deductions represent receivables that were charged off to the allowance during the year.(b)
    
    The 2005 and 2004 increases in the valuation allowance for deferred tax assets related
primarily to the net change in the underlying deferred tax assets associated with the Companys
discontinued operations in Canada. In 2006, the Company increased the
valuation allowance by $307,000 net, mainly for the benefits associated with certain foreign net operating losses. This
increase in valuation allowance was based on managements assessment that, due to changing business
conditions and the limitation of tax planning strategies, the Company was not likely to fully
realize these deferred tax assets.(c)
    
    In 2006, the decrease in valuation allowance for deferred tax
assets reflects: 1) adjustment of $8.2 million with a
corresponding reduction in the Canadian deferred tax assets;
2) utilization of a $3.3 million capital loss; 3) change in judgement of $1.7 million related to
Canadian estimated future taxable income; and
4) utilization/change in judgment/sale of operations of
$1.2 million related to non-Canadian foreign operations.(d)
    
    The 2005 and 2004 charges are adjustments to write down to estimated fair value the
S&T/Montreal and SatNet assets held for sale.(e)
    
    The 2006 and 2005 reductions in the allowance were a result of the sale of the Companys SatNet
and S&T/Montreal divisions. 42 of 76




---



##### Table of Contents



43 of 76




---



##### Table of Contents



44 of 76




---



##### Table of Contents



45 of 76




---



##### Table of Contents



46 of 76




---



##### Table of Contents



*
    
    Filed herewith 47 of 76




---



##### Table of Contents



SIGNATURES
  EMS TECHNOLOGIES, INC.By: /s/ Paul B. Domorski
    
    Date: 3/16/07President and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Paul B. Domorski

Paul B. Domorski
    
    President and Chief Executive Officer, and Director
(Principal Executive Officer)
    
    3/16/07/s/ Don T. Scartz

Don T. Scartz
    
    Executive Vice President, Chief Financial Officer,
and Treasurer (Principal Financial Officer)
    
    3/16/07/s/ Gary B. Shell

Gary B. Shell
    
    Vice President, Finance
(Principal Accounting Officer)
    
    3/16/07/s/ Hermann Buerger

Hermann Buerger
    
    Director
    
    3/16/07/s/ Francis J. Erbrick

Francis J. Erbrick
    
    Director
    
    3/16/07/s/ John R. Kreick

John R. Kreick
    
    Director
    
    3/16/07/s/ John B. Mowell

John B. Mowell
    
    Director, Chairman of the Board
    
    3/16/07/s/ Bradford W. Parkinson

Bradford W. Parkinson
    
    Director
    
    3/16/07/s/ Norman E. Thagard

Norman E. Thagard
    
    Director
    
    3/16/07/s/ John L. Woodward, Jr.

John L. Woodward, Jr.
    
    Director
    
    3/16/07
 48 of 76




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    50Consolidated Statements of Operations  Years ended December 31, 2006, 2005 and 2004
    
    
    51Consolidated Balance Sheets  December 31, 2006 and 2005
    
    
    52Consolidated Statements of Cash Flows  Years ended December 31, 2006, 2005 and 2004
    
    
    54Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) 
Years ended December 31, 2006, 2005 and 2004
    
    
    55Notes to Consolidated Financial Statements
    
    
    56
 49 of 76




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 50 of 76




---



##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 Years ended December 312006
    
    
    2005
    
    
    2004Product net sales
    
    $
    223,512
    
    
    
    192,275
    
    
    
    172,650Service net sales
    
    
    37,607
    
    
    
    33,612
    
    
    
    28,450Net sales (note 12)
    
    
    261,119
    
    
    
    225,887
    
    
    
    201,100Product cost of sales
    
    
    139,517
    
    
    
    124,701
    
    
    
    109,764Service cost of sales
    
    
    25,094
    
    
    
    22,264
    
    
    
    20,859Cost of sales
    
    
    164,611
    
    
    
    146,965
    
    
    
    130,623Selling, general and administrative expenses
    
    
    66,335
    
    
    
    56,944
    
    
    
    49,346Research and development expenses
    
    
    15,816
    
    
    
    11,754
    
    
    
    12,034Operating income
    
    
    14,357
    
    
    
    10,224
    
    
    
    9,097Interest income and other
    
    
    2,254
    
    
    
    588
    
    
    
    1,085Foreign exchange loss
    
    
    (710
    )
    
    
    (288
    )
    
    
    (187
    )Interest expense
    
    
    (1,921
    )
    
    
    (3,304
    )
    
    
    (1,791
    )Earnings from continuing operations before income taxes
    
    
    13,980
    
    
    
    7,220
    
    
    
    8,204Income tax (expense) benefit (note 9)
    
    
    1,823
    
    
    
    (2,094
    )
    
    
    (2,134
    )Earnings from continuing operations
    
    
    15,803
    
    
    
    5,126
    
    
    
    6,070Discontinued operations (note 2):Earnings (loss) from discontinued operations before income taxes
    
    
    24,427
    
    
    
    (13,971
    )
    
    
    (6,016
    )Income tax (expense) benefit
    
    
    (7,222
    )
    
    
    (2,598
    )
    
    
    138Earnings (loss) from discontinued operations
    
    
    17,205
    
    
    
    (16,569
    )
    
    
    (5,878
    )Net earnings (loss)
    
    $
    33,008
    
    
    
    (11,443
    )
    
    
    192Net earnings
(loss) per share (note 1):Basic:From continuing operations
    
    $
    1.08
    
    
    
    0.46
    
    
    
    0.55From discontinued operations
    
    
    1.18
    
    
    
    (1.48
    )
    
    
    (0.53
    )Net earnings (loss)
    
    $
    2.26
    
    
    
    (1.02
    )
    
    
    0.02Diluted:From continuing operations
    
    $
    1.08
    
    
    
    0.46
    
    
    
    0.54From discontinued operations
    
    
    1.17
    
    
    
    (1.48
    )
    
    
    (0.52
    )Net earnings (loss)
    
    $
    2.25
    
    
    
    (1.02
    )
    
    
    0.02Weighted
average number of shares (note 1):Common
    
    
    14,621
    
    
    
    11,179
    
    
    
    11,094Common and
dilutive common equivalent
    
    
    14,679
    
    
    
    11,225
    
    
    
    11,237
   51 of 76




---



##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 December 312006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    109,431
    
    
    
    12,795Restricted cash
    
    
    162
    
    
    
    2,620Trade accounts receivable, net (note 4)
    
    
    93,720
    
    
    
    80,438Inventories, net (note 5)
    
    
    26,042
    
    
    
    20,970Deferred income taxes, net (note 9)
    
    
    1,963
    
    
    
    1,433Assets held for sale (note 2)
    
    
    
    
    
    
    49,184Other current assets
    
    
    7,697
    
    
    
    8,651Total current assets
    
    
    239,015
    
    
    
    176,091Property, plant and equipment:Land
    
    
    1,150
    
    
    
    1,150Buildings and leasehold improvements
    
    
    15,361
    
    
    
    15,242Machinery and equipment
    
    
    72,569
    
    
    
    69,244Furniture and fixtures
    
    
    7,763
    
    
    
    7,69396,843
    
    
    
    93,329Less accumulated depreciation and amortization
    
    
    65,108
    
    
    
    62,124Net property, plant and equipment
    
    
    31,735
    
    
    
    31,205Deferred income taxes, net  non-current (note 9)
    
    
    6,282
    
    
    
    3,634Intangible
assets, net of accumulated amortization of $5,018 in 2006 and $3,924 in
2005 (note 6)
    
    
    2,084
    
    
    
    3,178Goodwill
    
    
    9,982
    
    
    
    9,982Other assets
    
    
    2,586
    
    
    
    1,251Total assets
    
    $
    291,684
    
    
    
    225,341
  52 of 76




---



##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS,
 December 312006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current installments of long-term debt (note 7)
    
    $
    3,102
    
    
    
    6,825Accounts payable
    
    
    29,285
    
    
    
    25,865Income taxes payable
    
    
    
    
    
    
    1,866Billings in excess of contract costs
    
    
    7,899
    
    
    
    5,881Accrued compensation costs
    
    
    8,042
    
    
    
    8,626Accrued retirement costs (note 10)
    
    
    2,666
    
    
    
    2,603Deferred service revenue
    
    
    6,289
    
    
    
    5,266Liabilities related to assets held for sale (note 2)
    
    
    
    
    
    
    13,139Other current liabilities
    
    
    5,162
    
    
    
    2,395Total current liabilities
    
    
    62,445
    
    
    
    72,466Long-term debt, excluding current installments (note 7)
    
    
    11,755
    
    
    
    36,583Other liabilities
    
    
    4,401
    
    
    
    2,636Total liabilities
    
    
    78,601
    
    
    
    111,685Shareholders equity:Preferred stock of $1.00 par value per share.
Authorized 10,000,000 shares; none issued
    
    
    
    
    
    
    Common stock of $.10 par value per share.
Authorized 75,000,000 shares, issued and outstanding 15,327,000 in 2006 and
11,343,000 in 2005
    
    
    1,533
    
    
    
    1,134Additional paid-in capital
    
    
    133,050
    
    
    
    71,389Accumulated other comprehensive income (loss)  foreign currency translation adjustment
    
    
    4,262
    
    
    
    (97
    )Retained earnings
    
    
    74,238
    
    
    
    41,230Total shareholders equity
    
    
    213,083
    
    
    
    113,656Total liabilities and shareholders equity
    
    $
    291,684
    
    
    
    225,341Commitments and contingencies (notes 2, 7, 13, 14, and 15)
  53 of 76




---



##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years ended December 312006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net earnings (loss)
    
    $
    33,008
    
    
    
    (11,443
    )
    
    
    192Adjustments to reconcile net earnings (loss) to net cash provided by (used in)
operating activities:Depreciation and other intangibles amortization
    
    
    8,864
    
    
    
    8,923
    
    
    
    7,295Deferred income taxes
    
    
    (3,178
    )
    
    
    899
    
    
    
    (1,079
    )Tax benefit for exercise of stock options
    
    
    213
    
    
    
    383
    
    
    
    384(Gain) loss on sale of assets
    
    
    (352
    )
    
    
    394
    
    
    
    (1,082
    )(Gain) loss from discontinued operations
    
    
    (17,205
    )
    
    
    16,569
    
    
    
    5,878Stock-based compensation expense
    
    
    987
    
    
    
    
    
    
    
    Changes in operating assets and liabilities, net of effects of acquisition:Trade accounts receivable
    
    
    (10,350
    )
    
    
    (14,200
    )
    
    
    (6,438
    )Billings in excess of contract costs
    
    
    2,042
    
    
    
    4,006
    
    
    
    (544
    )Inventories
    
    
    (4,880
    )
    
    
    349
    
    
    
    (320
    )Accounts payable
    
    
    2,234
    
    
    
    7,159
    
    
    
    2,312Income taxes payable
    
    
    (1,807
    )
    
    
    (369
    )
    
    
    4,196Non-trade foreign government receivable
    
    
    (408
    )
    
    
    434
    
    
    
    (1,014
    )Accrued costs, deferred revenue, and other current liabilities
    
    
    1,987
    
    
    
    3,176
    
    
    
    (1,089
    )Other current/non-current assets and liabilities
    
    
    (1,507
    )
    
    
    (102
    )
    
    
    568Net cash provided by operating activities in continuing operations
    
    
    9,648
    
    
    
    16,178
    
    
    
    9,259Net cash provided by (used in) operating activities in discontinued operations
    
    
    657
    
    
    
    (11,355
    )
    
    
    (6,833
    )Net cash provided by operating activities
    
    
    10,305
    
    
    
    4,823
    
    
    
    2,426Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (8,502
    )
    
    
    (9,102
    )
    
    
    (5,003
    )Payments for asset acquisitions
    
    
    (188
    )
    
    
    (125
    )
    
    
    (1,754
    )Proceeds from sale of assets
    
    
    59,521
    
    
    
    21,931
    
    
    
    2,846Net cash provided by (used in) investing activities in continuing operations
    
    
    50,831
    
    
    
    12,704
    
    
    
    (3,911
    )Net cash used in investing activities in discontinued operations
    
    
    (480
    )
    
    
    (1,822
    )
    
    
    (2,818
    )Net cash provided by (used in) investing activities
    
    
    50,351
    
    
    
    10,882
    
    
    
    (6,729
    )Cash flows from financing activities:Net increase (decrease) in revolving debt
    
    
    (26,683
    )
    
    
    (16,882
    )
    
    
    8,991Repayment of term debt
    
    
    (1,307
    )
    
    
    (1,342
    )
    
    
    (3,667
    )(Increase) decrease in restricted cash
    
    
    2,458
    
    
    
    2,095
    
    
    
    (4,715
    )Deferred financing costs paid
    
    
    (85
    )
    
    
    (98
    )
    
    
    (1,063
    )Proceeds from stock offering, net of expenses
    
    
    58,736
    
    
    
    
    
    
    
    Proceeds from exercise of stock options, net of withholding taxes paid
    
    
    2,124
    
    
    
    1,966
    
    
    
    3,709Net cash provided by (used in) financing activities
    
    
    35,243
    
    
    
    (14,261
    )
    
    
    3,255Net change in cash and cash equivalents
    
    
    95,899
    
    
    
    1,444
    
    
    
    (1,048
    )Effect of exchange rates on cash and cash equivalents
    
    
    737
    
    
    
    (2,983
    )
    
    
    1,258Cash and cash equivalents at January 1
    
    
    12,795
    
    
    
    14,334
    
    
    
    14,124Cash and cash equivalents at December 31
    
    $
    109,431
    
    
    
    12,795
    
    
    
    14,334Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    1,483
    
    
    
    4,869
    
    
    
    3,657Cash paid for income taxes
    
    
    9,357
    
    
    
    2,661
    
    
    
    562
  54 of 76




---



##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
 Three years ended December 31, 2006Accum-ulatedotherCompre-
    
    
    compre-
    
    
    
    
    
    
    TotalAdditional
    
    
    hensive
    
    
    hensive
    
    
    
    
    
    
    share-Common Stock
    
    
    paid-in
    
    
    income
    
    
    income
    
    
    Retained
    
    
    holdersShares
    
    
    Amount
    
    
    capital
    
    
    (loss)
    
    
    (loss)
    
    
    earnings
    
    
    equityBalance December 31, 2003
    
    
    10,926
    
    
    $
    1,093
    
    
    
    64,988
    
    
    
    
    
    
    
    1,480
    
    
    
    52,481
    
    
    
    120,042Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    192
    
    
    
    192Income tax benefit from exercise
ofnon-qualified stock options
(note 9)
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384Exercise of common stock options
    
    
    255
    
    
    
    25
    
    
    
    4,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,108Redemption of shares upon
exercise of common stock options
    
    
    (15
    )
    
    
    (2
    )
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (334
    )Foreign currency translation
adjustment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,694
    
    
    
    1,694
    
    
    
    
    
    
    
    1,694Repurchases of stock
    
    
    (2
    )
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )Other
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Comprehensive income for 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,886Balance December 31, 2004
    
    
    11,164
    
    
    
    1,116
    
    
    
    69,058
    
    
    
    
    
    
    
    3,174
    
    
    
    52,673
    
    
    
    126,021Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,443
    )
    
    
    
    
    
    
    (11,443
    )
    
    
    (11,443
    )Income tax benefit from exercise
of non-qualified stock options
(note 9)
    
    
    
    
    
    
    
    
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    383Exercise of common stock options
    
    
    221
    
    
    
    22
    
    
    
    2,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,664Redemption of shares upon
exercise of common stock options
    
    
    (42
    )
    
    
    (4
    )
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (695
    )Foreign currency translation
adjustment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,971
    
    
    
    1,971
    
    
    
    
    
    
    
    1,971Repurchases of stock
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Reclassification due to sale of
discontinued operations (note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,242
    )
    
    
    (5,242
    )
    
    
    
    
    
    
    (5,242
    )Comprehensive loss for 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,714
    )Balance December 31, 2005
    
    
    11,343
    
    
    
    1,134
    
    
    
    71,389
    
    
    
    
    
    
    
    (97
    )
    
    
    41,230
    
    
    
    113,656Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,008
    
    
    
    
    
    
    
    33,008
    
    
    
    33,008Income tax benefit from exercise
of non-qualified stock options
(note 9)
    
    
    
    
    
    
    
    
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213Exercise of common stock options
    
    
    215
    
    
    
    21
    
    
    
    3,387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,408Redemption of shares upon
exercise of common stock options
    
    
    (64
    )
    
    
    (6
    )
    
    
    (1,248
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,254
    )Repurchases of stock
    
    
    (2
    )
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Stock-based compensation
    
    
    40
    
    
    
    4
    
    
    
    983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    987Issuance of common stock (note 13)
    
    
    3,795
    
    
    
    380
    
    
    
    58,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,736Foreign currency translation
adjustment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,540
    
    
    
    2,540
    
    
    
    
    
    
    
    2,540Reclassification due to sale of
discontinued operations (note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,819
    
    
    
    1,819
    
    
    
    
    
    
    
    1,819Comprehensive income for 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,367Balance December 31, 2006
    
    
    15,327
    
    
    $
    1,533
    
    
    
    133,050
    
    
    
    
    
    
    
    4,262
    
    
    
    74,238
    
    
    
    213,083
  55 of 76




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006, 2005 and 2004
 (1) BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
            56 of 76




---



##### Table of Contents



Buildings
    
    
    20 to 40 yearsMachinery and equipment
    
    
    3 to 8 yearsFurniture and fixtures
    
    10 years
    57 of 76




---



##### Table of Contents



58 of 76




---



##### Table of Contents



2006
    
    2005
    
    2004Weighted average number of shares  basic
    
    
    14,621
    
    
    
    11,179
    
    
    
    11,094Assumed conversion of options into common shares
    
    
    58
    
    
    
    46
    
    
    
    143Weighted average number of shares  diluted
    
    
    14,679
    
    
    
    11,225
    
    
    
    11,237
           59 of 76




---



##### Table of Contents



Effect of New Accounting Pronouncements
      60 of 76




---



##### Table of Contents



(2) DISCONTINUED
OPERATIONS
      61 of 76




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Net sales
    
    $
    46,294
    
    
    
    143,926
    
    
    
    111,204Expenses
    
    
    45,499
    
    
    
    141,697
    
    
    
    115,520Gain on sale of assets
    
    
    (26,856
    )
    
    
    
    
    
    
    Loss on the sale of assets
    
    
    3,224
    
    
    
    
    
    
    
    Estimated loss on disposal
    
    
    
    
    
    
    16,200
    
    
    
    1,700Earnings (loss) before income taxes
    
    
    24,427
    
    
    
    (13,971
    )
    
    
    (6,016
    )Income tax (expense) benefit
    
    
    (7,222
    )
    
    
    (2,598
    )
    
    
    138Earnings (loss) from discontinued operations
    
    $
    17,205
    
    
    
    (16,569
    )
    
    
    (5,878
    )
    62 of 76




---



##### Table of Contents



Dec 31
    
    
    Dec 312006
    
    
    2005Cash and cash equivalents
    
    $
    
    
    
    
    183Trade accounts receivable, net
    
    
    
    
    
    
    21,833Inventories
    
    
    
    
    
    
    16,738Property, plant and equipment, net
    
    
    
    
    
    
    3,075Other assets
    
    
    
    
    
    
    7,355Total assets held for sale
    
    $
    
    
    
    
    49,184Accounts payable
    
    $
    
    
    
    
    9,812Other current liabilities
    
    
    
    
    
    
    3,327Total liabilities related to assets held for sale
    
    $
    
    
    
    
    13,139
 (3) ACQUISITIONS
  (4) TRADE
ACCOUNTS RECEIVABLE
  Dec 31
    
    
    Dec 312006
    
    
    2005Amounts billed
    
    $
    71,327
    
    
    
    53,057Unbilled revenues under long-term contracts (1)
    
    
    23,134
    
    
    
    27,969Allowance for doubtful accounts
    
    
    (741
    )
    
    
    (588
    )Trade accounts receivable, net
    
    $
    93,720
    
    
    
    80,438
 
 (1)
    Unbilled net sales under long-term contracts are usually billed and collected within one year (5) INVENTORIES
  Dec 31
    
    
    Dec 312006
    
    
    2005Parts and materials
    
    $
    17,318
    
    
    
    14,782Work-in-process
    
    
    4,124
    
    
    
    2,310Finished goods
    
    
    4,600
    
    
    
    3,878Inventories, net
    
    $
    26,042
    
    
    
    20,970
 63 of 76




---



##### Table of Contents



(6) OTHER
INTANGIBLE ASSETS
   (7) LONG-TERM
DEBT
  2006
    
    
    2005Revolving credit loans with U.S. and Canadian
financial institutions, secured by
substantially all the assets of the Company,
except for certain real estate that secures
existing mortgages and other permitted liens,
maturing in December 2007, interest payable
quarterly at a variable rate (8.62% at the end
of 2005)
    
    $
    
    
    
    
    26,804Promissory note, secured by a first mortgage
on the Companys headquarters facility,
maturing in 2016, principal and interest
payable in equal monthly installments of $104
with a fixed interest rate of 8.0%
    
    
    8,332
    
    
    
    8,889Term loan with an insurance company, secured
by a U.S. building, maturing in February 2014,
principal and interest payable in equal
monthly installments of $68 with a fixed
interest rate of 7.1%
    
    
    4,521
    
    
    
    4,995Capital lease agreements, secured by machinery
and equipment, computer hardware, software and
peripherals, with various terms through 2009,
due in quarterly installments with implicit
interest rates of 3.0% to 4.2%
    
    
    29
    
    
    
    338Financing agreements, related to installation
of computer hardware and peripherals and
implementation of software, maturing in April
2007, principal and interest payable in equal
quarterly installments of $155 with an average
fixed interest rate of 5.79%
    
    
    154
    
    
    
    750Revolving credit loan with a bank in the
United Kingdom, maturing in April 2007,
interest payable monthly at a variable rate
(6.00% at the end of 2006 and 5.50% at the end
of 2005)
    
    
    1,821
    
    
    
    1,632Total long-term debt
    
    
    14,857
    
    
    
    43,408Less current installments of long-term debt
    
    
    3,102
    
    
    
    6,825Long-term debt, excluding current installments
    
    $
    11,755
    
    
    
    36,583
   64 of 76




---



##### Table of Contents



2007
    
    $
    3,1022008
    
    
    1,1542009
    
    
    1,2932010
    
    
    1,3912011
    
    
    1,500Thereafter
    
    
    6,417Total principal maturities
    
    $
    14,857
   2007
    
    $
    152008
    
    
    102009
    
    
    4Total capital lease payments
    
    
    29Less: Interest payments
    
    
    Capital lease obligations
    
    $
    29
  (8) STOCK
PLANS
  65 of 76




---



##### Table of Contents



Outstanding
    
    
    
    
    
    ExercisableWeighted
    
    Weighted Average
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Average Price
    
    Remaining Years In
    
    
    
    
    
    Average PriceExercise Prices
    
    Shares
    
    Per Share
    
    Contractual Life
    
    Shares
    
    Per Share$
    11.63 - 13.90
    
    
    
    123
    
    
    $
    13.08
    
    
    
    5.2
    
    
    
    104
    
    
    $
    13.0513.90 - 14.94
    
    
    
    111
    
    
    
    14.20
    
    
    
    5.3
    
    
    
    108
    
    
    
    14.2014.94 - 15.81
    
    
    
    79
    
    
    
    15.61
    
    
    
    4.9
    
    
    
    46
    
    
    
    15.6515.81 - 17.88
    
    
    
    11
    
    
    
    17.23
    
    
    
    2.7
    
    
    
    11
    
    
    
    17.2317.88 - 18.99
    
    
    
    287
    
    
    
    18.47
    
    
    
    3.9
    
    
    
    188
    
    
    
    18.6918.99 - 22.75
    
    
    
    291
    
    
    
    20.50
    
    
    
    5.1
    
    
    
    187
    
    
    
    20.8422.75 - 23.88
    
    
    
    133
    
    
    
    23.82
    
    
    
    2.6
    
    
    
    133
    
    
    
    23.8211.63 - 23.88
    
    
    
    1,035
    
    
    
    18.39
    
    
    
    4.4
    
    
    
    777
    
    
    
    18.50
     Options with service-based vesting only
  66 of 76




---



##### Table of Contents



2005
    
    
    2004Net earnings (loss):As reported (1)
    
    $
    (11,443
    )
    
    
    192Stock-based employee compensation expense determined under the fair
value method, net of tax
    
    
    (947
    )
    
    
    (2,137
    )Pro forma net loss
    
    $
    (12,390
    )
    
    
    (1,945
    )Basic net earnings (loss) per share:As reported
    
    $
    (1.02
    )
    
    
    0.02Pro forma
    
    
    (1.11
    )
    
    
    (0.18
    )Diluted net earnings (loss) per share:As reported
    
    $
    (1.02
    )
    
    
    0.02Pro forma
    
    
    (1.10
    )
    
    
    (0.17
    )
 
 (1)
    
    Stock compensation expense has not been recognized in net loss   WeightedAverageWeighted
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicShares
    
    Exercise Price
    
    Term (years)
    
    ValueOptions outstanding at December 31, 2005
    
    
    1,243
    
    
    $
    18.08Granted
    
    
    52
    
    
    
    18.99Exercised
    
    
    (215
    )
    
    
    15.90
    
    
    
    
    
    
    $
    742Forfeited or expired
    
    
    (219
    )
    
    
    19.61Options outstanding at December 31, 2006
    
    
    861
    
    
    
    18.28
    
    
    
    4.4
    
    
    
    2,260Options exercisable at December 31, 2006
    
    
    777
    
    
    
    18.50
    
    
    
    4.2
    
    
    
    1,780
  67 of 76




---



##### Table of Contents



Options with performance-based and service-based vesting
   WeightedWeighted
    
    Weighted
    
    AverageAverage
    
    Average
    
    Remaining
    
    AggregateExercise
    
    Grant-Date
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Fair Value
    
    Term (years)
    
    ValueOptions outstanding at December 31, 2005
    
    
    Granted
    
    
    183
    
    
    $
    18.90
    
    
    
    10.09Exercised
    
    
    Forfeited or expired
    
    
    (9
    )
    
    
    18.05
    
    
    
    9.57Options outstanding at December 31, 2006
    
    
    174
    
    
    
    18.95
    
    
    
    10.11
    
    
    
    5.3
    
    
    $
    
   Nonvested stock
  WeightedAverageGrant-DateShares
    
    Fair ValueNon-vested stock outstanding at December 31, 2005
    
    
    
    
    
    $
    Granted
    
    
    40
    
    
    
    17.92Vested
    
    
    
    
    
    
    Forefeited or expired
    
    
    
    
    
    
    Non-vested stock outstanding at December 31, 2006
    
    
    40
    
    
    $
    17.92
  68 of 76




---



##### Table of Contents



(9) INCOME
TAXES
  2006
    
    
    2005
    
    
    2004Income tax benefit (expense), continuing operations
    
    $
    1,823
    
    
    
    (2,094
    )
    
    
    (2,134
    )Income tax benefit (expense), discontinued operations
    
    
    (7,222
    )
    
    
    (2,598
    )
    
    
    138Income tax benefit resulting from exercise of stock
options credited to shareholders equity
    
    
    213
    
    
    
    383
    
    
    
    384Total
    
    $
    (5,186
    )
    
    
    (4,309
    )
    
    
    (1,612
    )
  2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    395
    
    
    
    32
    
    
    
    (974
    )State
    
    
    (506
    )
    
    
    (272
    )
    
    
    (206
    )Foreign
    
    
    (1,806
    )
    
    
    (53
    )
    
    
    (981
    )Total
    
    
    (1,917
    )
    
    
    (293
    )
    
    
    (2,161
    )Deferred:Federal
    
    
    2,457
    
    
    
    (1,433
    )
    
    
    74State
    
    
    42
    
    
    
    28
    
    
    
    (42
    )Foreign
    
    
    1,241
    
    
    
    (396
    )
    
    
    (5
    )Total
    
    
    3,740
    
    
    
    (1,801
    )
    
    
    27Total income tax benefit (expense)
    
    $
    1,823
    
    
    
    (2,094
    )
    
    
    (2,134
    )
  2006
    
    
    2005
    
    
    2004Computed expected income tax expense
    
    $
    (4,893
    )
    
    
    (2,455
    )
    
    
    (2,789
    )Reduction (increase) in income tax:State income taxes, net of federal income tax effect
    
    
    (321
    )
    
    
    (130
    )
    
    
    (166
    )Tax credits from research activities
    
    
    4,181
    
    
    
    34
    
    
    
    64Difference in effective foreign tax rates
    
    
    1,494
    
    
    
    845
    
    
    
    673Net decrease (increase) to valuation allowance for
deferred tax assets
    
    
    1,881
    
    
    
    (242
    )
    
    
    Foreign
permanent differences
    
    
    (366
    )
    
    
    
    
    
    
    Other
    
    
    (153
    )
    
    
    (146
    )
    
    
    84Income tax benefit (expense)
    
    $
    1,823
    
    
    
    (2,094
    )
    
    
    (2,134
    )
  69 of 76




---



##### Table of Contents



2006
    
    
    2005Deferred tax assets:Accounts receivable
    
    $
    160
    
    
    
    214Inventories
    
    
    884
    
    
    
    1,544Accrued compensation costs
    
    
    975
    
    
    
    834Gain on sales to foreign subsidiaries
    
    
    222
    
    
    
    232Accrued warranty costs
    
    
    626
    
    
    
    1,669Foreign research expense and tax credit carry forward
    
    
    38,077
    
    
    
    48,136Foreign net operating loss carry forward
    
    
    437
    
    
    
    1,798Impairment on investment
    
    
    
    
    
    
    3,265Credit for corporate minimum tax
    
    
    636
    
    
    
    Research and development credit carry forward
    
    
    1,901
    
    
    
    Intellectual property
    
    
    187
    
    
    
    218Stock-based compensation
    
    
    279
    
    
    
    Other
    
    
    396
    
    
    
    365Total gross deferred tax assets
    
    
    44,780
    
    
    
    58,275Valuation allowance
    
    
    (32,921
    )
    
    
    (46,969
    )Net deferred tax assets
    
    
    11,859
    
    
    
    11,306Deferred tax liabilities:Property, plant and equipment
    
    
    3,319
    
    
    
    6,174Customer holdbacks receivable
    
    
    65
    
    
    
    65Other
    
    
    230
    
    
    
    Total gross deferred tax liabilities
    
    
    3,614
    
    
    
    6,239Net deferred tax assets
    
    $
    8,245
    
    
    
    5,067
    70 of 76




---



##### Table of Contents



(10) RETIREMENT
PLANS
    (11) FAIR
VALUE OF FINANCIAL INSTRUMENTS
     (12) BUSINESS
SEGMENT AND GEOGRAPHIC AREA INFORMATION
      71 of 76




---



##### Table of Contents



Years ended December 312006
    
    
    2005
    
    
    2004Net sales:Defense & Space Systems
    
    $
    52,431
    
    
    
    51,409
    
    
    
    50,059Less sales to discontinued operations
    
    
    (15
    )
    
    
    (15
    )
    
    
    (244
    )Defense & Space Systems external sales
    
    
    52,416
    
    
    
    51,394
    
    
    
    49,815LXE
    
    
    138,001
    
    
    
    123,140
    
    
    
    111,575SATCOM
    
    
    70,702
    
    
    
    51,353
    
    
    
    39,693Other
    
    
    
    
    
    
    
    
    
    
    17Total
    
    $
    261,119
    
    
    
    225,887
    
    
    
    201,100Operating income (loss):Defense & Space Systems
    
    $
    2,572
    
    
    
    3,186
    
    
    
    2,611LXE
    
    
    11,043
    
    
    
    7,520
    
    
    
    7,262SATCOM
    
    
    6,170
    
    
    
    3,524
    
    
    
    1,713Other
    
    
    
    
    
    
    
    
    
    
    (110
    )Corporate
    
    
    (5,428
    )
    
    
    (4,006
    )
    
    
    (2,379
    )Total
    
    $
    14,357
    
    
    
    10,224
    
    
    
    9,097Interest income and other, net of
foreign exchange gain (loss):Defense & Space Systems
    
    $
    28
    
    
    
    (4
    )
    
    
    (1
    )LXE
    
    
    8
    
    
    
    148
    
    
    
    89SATCOM
    
    
    (66
    )
    
    
    (203
    )
    
    
    (171
    )Other
    
    
    
    
    
    
    
    
    
    
    873Corporate
    
    
    1,574
    
    
    
    359
    
    
    
    108Total
    
    $
    1,544
    
    
    
    300
    
    
    
    898Interest expense:Defense & Space Systems
    
    $
    (444
    )
    
    
    (372
    )
    
    
    (450
    )LXE
    
    
    (405
    )
    
    
    (474
    )
    
    
    (439
    )SATCOM
    
    
    (117
    )
    
    
    (264
    )
    
    
    (93
    )Corporate
    
    
    (955
    )
    
    
    (2,194
    )
    
    
    (809
    )Total
    
    $
    (1,921
    )
    
    
    (3,304
    )
    
    
    (1,791
    )Income tax (expense) benefit:Defense & Space Systems
    
    $
    (823
    )
    
    
    (1,068
    )
    
    
    (823
    )LXE
    
    
    (4,056
    )
    
    
    (2,734
    )
    
    
    (2,626
    )SATCOM
    
    
    138
    
    
    
    443
    
    
    
    326Other
    
    
    (517
    )
    
    
    (233
    )
    
    
    (472
    )Corporate
    
    
    7,081
    
    
    
    1,498
    
    
    
    1,461Total
    
    $
    1,823
    
    
    
    (2,094
    )
    
    
    (2,134
    )
 72 of 76




---



##### Table of Contents



Years ended December 312006
    
    
    2005
    
    
    2004Net earnings (loss):Defense & Space Systems
    
    $
    1,333
    
    
    
    1,742
    
    
    
    1,337LXE
    
    
    6,590
    
    
    
    4,460
    
    
    
    4,286SATCOM
    
    
    6,125
    
    
    
    3,500
    
    
    
    1,775Other
    
    
    (517
    )
    
    
    (233
    )
    
    
    291Corporate
    
    
    2,272
    
    
    
    (4,343
    )
    
    
    (1,619
    )Earnings from continuing operations
    
    
    15,803
    
    
    
    5,126
    
    
    
    6,070Discontinued operations, net
    
    
    17,205
    
    
    
    (16,569
    )
    
    
    (5,878
    )Total
    
    $
    33,008
    
    
    
    (11,443
    )
    
    
    192Capital expenditures:Defense & Space Systems
    
    $
    2,391
    
    
    
    2,735
    
    
    
    1,278LXE
    
    
    2,467
    
    
    
    2,243
    
    
    
    2,677SATCOM
    
    
    3,227
    
    
    
    2,743
    
    
    
    335Corporate
    
    
    417
    
    
    
    1,381
    
    
    
    713Total
    
    $
    8,502
    
    
    
    9,102
    
    
    
    5,003Depreciation and amortization:Defense & Space Systems
    
    $
    2,558
    
    
    
    2,631
    
    
    
    2,599LXE
    
    
    2,246
    
    
    
    2,419
    
    
    
    2,150SATCOM
    
    
    2,851
    
    
    
    2,832
    
    
    
    1,961Other
    
    
    
    
    
    
    
    
    
    
    4Corporate
    
    
    1,209
    
    
    
    1,041
    
    
    
    581Total
    
    $
    8,864
    
    
    
    8,923
    
    
    
    7,295
 As of December 312006
    
    
    2005Assets:Defense & Space Systems
    
    $
    48,517
    
    
    
    45,975LXE
    
    
    88,925
    
    
    
    71,759SATCOM
    
    
    60,730
    
    
    
    45,223Other
    
    
    3,809
    
    
    
    8,395Assets held for sale
    
    
    
    
    
    
    49,184Corporate
    
    
    89,703
    
    
    
    4,805Total
    
    $
    291,684
    
    
    
    225,341Goodwill  LXE
    
    $
    9,982
    
    
    
    9,982
 73 of 76




---



##### Table of Contents



Years ended December 31,2006
    
    
    2005
    
    
    2004Net sales to customers in the following countries:United States
    
    $
    178,662
    
    
    
    150,522
    
    
    
    119,982United Kingdom
    
    
    13,542
    
    
    
    14,171
    
    
    
    16,292Other foreign countries
    
    
    68,915
    
    
    
    61,194
    
    
    
    64,826Total
    
    $
    261,119
    
    
    
    225,887
    
    
    
    201,100
 As of December 31,2006
    
    
    2005Long-lived assets are located in the following countries:United States
    
    $
    23,821
    
    
    
    24,598Canada
    
    
    8,743
    
    
    
    8,508Other foreign countries
    
    
    1,255
    
    
    
    1,277Total
    
    $
    33,819
    
    
    
    34,383
  (13) ISSUANCE
OF COMMON STOCK
  (14) COMMITMENTS
AND CONTINGENCIES
     74 of 76




---



##### Table of Contents



Years ended December 312006
    
    
    2005
    
    
    2004Balance at beginning of the year
    
    $
    1,894
    
    
    
    1,613
    
    
    
    1,545Accruals for warranties issued during the year
    
    
    1,945
    
    
    
    1,132
    
    
    
    1,926Settlements made during the year
    
    
    (1,788
    )
    
    
    (851
    )
    
    
    (1,858
    )Balance at end of year
    
    $
    2,051
    
    
    
    1,894
    
    
    
    1,613
 (15) LITIGATION
  75 of 76




---



##### Table of Contents



(16) SELECTED
QUARTERLY FINANCIAL DATA (UNAUDITED)
  2006 Quarters ended1-Apr
    
    
    1-Jul
    
    
    30-Sep
    
    
    31-DecNet sales
    
    $
    59,045
    
    
    
    65,046
    
    
    
    64,661
    
    
    
    72,367Operating income
    
    
    2,378
    
    
    
    3,365
    
    
    
    2,740
    
    
    
    5,874Earnings from continuing operations
    
    
    1,264
    
    
    
    2,241
    
    
    
    5,490
    
    
    
    6,808Earnings (loss) from discontinued operations
    
    
    (1,036
    )
    
    
    (569
    )
    
    
    82
    
    
    
    18,728Net earnings
    
    
    228
    
    
    
    1,672
    
    
    
    5,572
    
    
    
    25,536Net earnings (loss) per share:Basic:Continuing operations
    
    $
    0.10
    
    
    
    0.15
    
    
    
    0.36
    
    
    
    0.45Discontinued operations
    
    
    (0.08
    )
    
    
    (0.04
    )
    
    
    0.01
    
    
    
    1.23Net earnings
    
    $
    0.02
    
    
    
    0.11
    
    
    
    0.37
    
    
    
    1.68Diluted:Continuing operations
    
    $
    0.10
    
    
    
    0.15
    
    
    
    0.36
    
    
    
    0.44Discontinued operations
    
    
    (0.08
    )
    
    
    (0.04
    )
    
    
    0.01
    
    
    
    1.23Net earnings
    
    $
    0.02
    
    
    
    0.11
    
    
    
    0.37
    
    
    
    1.67
 2005 Quarters ended2-Apr
    
    
    2-Jul
    
    
    1-Oct
    
    
    31-DecNet sales
    
    $
    47,963
    
    
    
    57,054
    
    
    
    58,525
    
    
    
    62,345Operating income (loss)
    
    
    (156
    )
    
    
    3,551
    
    
    
    3,861
    
    
    
    2,968Earnings (loss) from continuing operations
    
    
    (580
    )
    
    
    1,894
    
    
    
    2,173
    
    
    
    1,639Earnings (loss) from discontinued operations
    
    
    276
    
    
    
    (7,540
    )
    
    
    (3,174
    )
    
    
    (6,131
    )Net loss
    
    
    (304
    )
    
    
    (5,646
    )
    
    
    (1,001
    )
    
    
    (4,492
    )Net earnings (loss) per share:Basic:Continuing operations
    
    $
    (0.05
    )
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.15Discontinued operations
    
    
    0.02
    
    
    
    (0.68
    )
    
    
    (0.28
    )
    
    
    (0.55
    )Net loss
    
    $
    (0.03
    )
    
    
    (0.51
    )
    
    
    (0.09
    )
    
    
    (0.40
    )Diluted:Continuing operations
    
    $
    (0.05
    )
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.15Discontinued operations
    
    
    0.02
    
    
    
    (0.67
    )
    
    
    (0.28
    )
    
    
    (0.55
    )Net loss
    
    $
    (0.03
    )
    
    
    (0.50
    )
    
    
    (0.09
    )
    
    
    (0.40
    )
 76 of 76